Savings rates see biggest fall in over a decade
Average interest rates on savings accounts fall
1st July 2020 11:06
by Brean Horne from interactive investor
Average interest rates on savings accounts fall
Savers face dismal prospects as rates tumble to their lowest level in over a decade, data from Moneyfacts reveals.
The average easy access account now pays 0.27%, compared to 0.59% at the start of the year.
Similarly, the average easy access cash Isa currently offers 0.37%, down from 0.85% in January.
But savings rates on longer-term deals, which Moneyfacts defines as over 18 months' duration, have suffered the most this year.
The average longer-term fixed Isa for example, pays interest of 0.81% today, down from 1.37% seven months ago.
This is 0.4% less than the average easy access cash Isa.
Similarly, longer-term fixed bonds also saw a significant fall in interest since January, with the average rate falling from 1.48% to 0.92%.
Experts advise that savers act quickly to take advantage of good rates, as they are likely to reduce further or disappear completely.
Rachel Springall, finance expert at Moneyfacts.co.uk, says: “It is imperative that savers act quickly to acquire the top rates on the market regardless of which type of savings account they choose, as there seems no end to the downward trend.
“Due to the uncertainties that the coronavirus pandemic has instilled, it is more important than ever before for consumers to build up an emergency fund that they can dip in to should they run into any financial difficulties in the months to come.”
Why are rates so low?
Today’s low savings rates follow almost a decade of low interest.
The savings market began to deteriorate more rapidly this year following the Bank of England’s decision to reduce the base rate twice, down to 0.1%, its lowest level in history.
Most savings providers began to slash interest rates on their accounts following the base rate cuts.
This, coupled with continued uncertainty surrounding the coronavirus pandemic, has caused savings rates in the UK to plummet.
Where can you find the best rates?
National Savings & Investments (NS&I) now offers the two best easy-access interest rates, according to data from Savings Champion.
The NS&I Income Bonds account pays 1.16% and requires a minimum deposit of ÂŁ500.
This is followed by the NS&I Direct Saver which pays 1% and can be opened with a minimum deposit of ÂŁ1.
The next best rate is offered by Yorkshire Building Society’s Annual Access Account (Issue 4) which pays 0.95% and requires a minimum deposit of £1.
This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.
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